PRELIM EXAMINATION IN FINANCE 3

1. FACTOR ENDOWNMENTS AND PRODUCTIVITY is talks about resources of a country like land,
labor and capital, with the high or great access of this resources of a country it will have a
economic comparative advantage to other countries. For example, with abundant natural
resources like oil, it has a great tend to export oil to other country which are lacking of oil.
Same with countries who have more resources than other country like in the Philippines we
have been exporting human capital in the forms of OFWs.

2. The increase in global competition help domestic productivity to improve their products by for
example in Thailand before they don’t know how to plant rice and Filipinos taught them and
now they are one of great in exporting rice to other countries. With learning how to compete
globally a country must learn how to use their resources to increase in there production of such
resources and by these improvement it helps them grow not only in exporting but supplying also
domestically so they will limit their importation of such resources since they have plenty of it.

3. The concept of comparative advantage deals with the opportunity cost it is the value that you
gain or loss in choosing another option. This concept provides evidence for the possibility that a
developed country’s industry could compete in a less develop country. A country can export
human capital with the cost of $1,000 but there’s an option that if they will import human
capital to teach their people and it will only cost $300, and the country chooses to just import
and save the $700 to improve and innovate their people.

4. The international trade improve the nation’s standard of living for example for the past months
the Philippines is experiencing shortages of onions and the production of which is low, and the
demand for it is high so the price is high, By importing onions form other country and cost is
lower than the onion that we have now will benefit the consumer demand and it will cost less to
the consumer and by this it will lessen the burden of the buyer and will allocate their other
budget for other necessity.

5. The difference of Ricardian and specific factor model is in Ricardian it talks about two countries
and two good with one factor of production which is the labor. For example the two countries
having 2 goods: one is the production of wine and cheese a country with more labor can
produce more products than the other and has the great opportunity to compete with other
country, hence the specific factor having two countries two goods but having also two factor of
production which is the capital and labor, example of this is one country is having lesser labor
force but improving in capital factor which is the technology to help in the outputs of each
production of goods.